I'm the host of the Stay Wealthy Retirement Show and founder of Define Financial, an award-winning retirement and tax planning firm. When I’m not helping people lower their tax bill, you can find me traveling with my wife and kids, searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.
Hi Reader,
If there’s a message to take from 2023 markets, it is this:
Timeless wisdom best informs timely decisions.
Here’s how Morgan Housel describes it:
In today's email, I'm sharing 3 timeless tenets that offer helpful insights for the year ahead.
But first...did you catch this week's podcast episode?
Listen to How to Evaluate (and Choose!) a Financial Advisor.👇
Perhaps most obviously, last year demonstrated how randomly—and rapidly—markets can move.
As The Wall Street Journal reported at year-end:
Another financial journal wrote:
Many financial pundits offered elaborate explanations for why (in hindsight) their projections were so far off.
While their reasons may be accurate, the implication was:
"Were it not for this, that, or the other thing, our forecasts would have been correct."
The problem is, there’s almost always “this, that, or the other thing” going on in this big, busy world.
Thus, it really should be no surprise that routine surprises regularly randomize the market’s next moves.
We’ve known this for years—since at least 1973 when Burton Malkiel published the first edition of “A Random Walk Down Wall Street.”
Even after 50 years, Malkiel’s message represents one of the most timeless truths explaining why we don’t try to time market trends.
In 2023, just seven stocks within the S&P 500 Index explained almost two-thirds of the index’s total annual gains.
Their striking performance earned them the catchy title, “Magnificent Seven.”
So, what should we expect for this star lineup in the coming year?
Search today’s popular press, and you’ll find timely tips galore on whether to bulk up on more magnificence, or sell while the selling is good.
Forecasts hinge on the usual suspects:
Whether inflation rises or falls...a recession lands or recedes...technologies advance or retreat...and so on.
Taking a more timeless view, I would suggest being wary of celebrated stocks bearing trendy titles.
Chasing after stellar returns with their own nicknames may work for a while.
But eventually, one of those “surprises” tends to come along, turning once-hot stocks into cold plays.
This brings us to our third timeless tenet.
Viewing 2023 up close, there may be a temptation to chase after the market’s recent winning streak, bulking up on more of what has been so pleasantly surprising of late.
Zooming out, my perspective remains unchanged:
Match your unique retirement needs and goals (i.e., your diagnosis) with an academically sound diversified portfolio (i.e., your prescription).
Treat an allocation to the Magnificent Seven (and the next trend...and the one after that) as one of many “pistons” powering the market’s perennial growth.
But pair it with effective diversification to temper the inevitable upsets that await us in the year(s) ahead.
In this spirit, I wish you a well-diversified investment portfolio in 2024, along with abundant concentrations of health, happiness, and harmonious well-being for you and yours.
📖 Get caught up on past emails: Stay Wealthy Newsletter Archive
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Stay wealthy,
Retirement and tax planning tips...in plain English.
I'm the host of the Stay Wealthy Retirement Show and founder of Define Financial, an award-winning retirement and tax planning firm. When I’m not helping people lower their tax bill, you can find me traveling with my wife and kids, searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.
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